Fixed-rate vs tracker mortgage

If you’re deliberating on whether a fixed-rate or tracker mortgage is the best option for you, then you may find this article helpful, as we take a look at the differences.

Fixed-rate mortgages

Regardless of interest rate changes, a fixed-rate mortgage is secure for the length of the fixed-rate product.

Whether your product is two, three, five years or longer this type of mortgage is protected from interest rate changes. However, if rates fall your payments will remain the same and you will miss out on the benefits of lower rates.


You know exactly what your mortgage will cost.
Your payments will never change during the fixed term, no matter how high or low rates go.

Starting rates are typically higher. If interest rates fall, your payments won’t drop. If you want to exit the product, you will have to pay Early Repayment Charges (ERCs).


Rates track a fixed economic indicator – typically the Bank of England base rate. If the rate increases, so does your mortgage payment. If it falls, so does your mortgage payment.


Transparent. Only economic change can move your mortgage rate.

Uncertainty. Large increases to the bank base rate could mean significantly higher future costs.


Types of mortgages available


Your payments are locked in and you only pay the fixed amount, regardless of what the Bank of England Base Rate is doing.

  • Your mortgage rate is fixed for a period — typically 2, 3, 5 or 10 years
  • Gives you a fixed figure so you can calculate your monthly budget
  • Exact cost known
  •  You are protected from rate increases (during fixed period)
  • You move on to your lender’s Standard Variable Rate at the end of the fixed rate period (unless you remortgage or select another product from that lender)

Look out for:

  • Early Repayment Charges and arrangement fees (these are likely)
  • Payment shock when a fixed rate product comes to an end with new available rates dramatically higher

How does the Bank of England affect this?

  • Any interest rate rises won’t impact your fixed rate However
  • You will not benefit from any decreases in the base rate



Your payments track the Bank of England Base Rate plus additional interest. This rate is directly affected by the Bank of England Base Rate.

  • You may benefit from immediate rate reductions
  • Tracks an interest rate that is usually set in line with the Bank of England base rate for a certain period of time
  • Payments more accurately reflect underlying interest rates of the time

Look out for:

  • Arrangement fees • Early Repayment Charges and arrangement fees (these are possible)
  • Payment shock when changes in the base rate cause rates to be dramatically higher

How does the Bank of England affect this?

  • You are not protected from rate increases
  • Immediately follows base rate increases and decreases



Your payments follow your current lender’s Standard Variable Rate (SVR). This rate is usually based on the Bank of England Base Rate plus additional interest set by the lender.

  • No hidden extra charges - You always pay the lender’s current SVR
  • You may benefit from rate reductions
  • You are unlikely to have any arrangement fees or Early Repayment Charges
  • Provides flexibility to be able to repay or alter your mortgage should your circumstances change, without incurring additional costs

Look out for:

  • Your monthly budgeting (this can be more difficult)

How does the Bank of England affect this?

  • When the base rate rises - the SVR will likely increase too and this typically is higher for most lenders than the Bank of England Base Rate


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